TO THE MEMBERS
COMFORT INTECH LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Comfort IntechLimited ("the Company") which comprise the Balance Sheet as at March 31 2020the Statement of Profit and Loss statement of changes in Equity and the Statement of CashFlows for the year ended on that date and notes to the financial statements including asummary of the significant accounting policies and other explanatory information(hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to the explanationsgiven to us except for the effects of the matter described in Basis for Qualified Opinionsection of our report the aforesaid standalone financial statements give the informationrequired by the Companies Act 2013 ("the Act") in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards and otheraccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2020 the loss changes in equity and its cash flows for the year ended onthat date.
Basis for Qualified Opinion
The Company has not provided for defined benefit obligation in the nature of gratuitybased on the requirement of Ind AS 19 i.e. "Employee Benefit" which requiresdefined benefit obligation to be recognised based on actuarial valuation basis. In absenceof valuation we are unable to quantify the impact of above on the net profit for the yearand liabilities as on reporting date.
We conducted our audit of the financial statements in accordance with the Standards onAuditing specified under section 143(10) of the Act (SAs). Our responsibilities underthose Standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (ICAI) together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules made thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our qualified opinion on the financial statements.
Emphasis of Matter
a) We draw attention to Note No 33 to the financial statements regarding the Companynot being able to recover a loan from the legal heir of a borrower given against securityof shares of a listed entity (Pledge Security) the balance as on 31-03-2020 is Rs.19.63crores. Consequently the Company has invoked the said pledge Security. Major quantity ofthe said invoked pledge security has been freezed by a statutory authority on account oflegal disputed matter of the company and hence company is unable to sell the same torecover the loan and interest thereon. Mangement is confident of freeze getting lifted onpledge security as the said pledge security is not part of the dispute. The Pledgesecurity is infrequently traded on the stock exchanges. The quoted Market value of PledgeSecurity is Rs 7.65 crores as on 31-03-2020 and as on signing of financial accounts isapprox Rs.9.70 Crore. In view of the weak sentiment in the equity markets and the subduedbusiness climate due to Covid 19 pandemic situation management is of the view that quotedprice of pledge security cannot be taken as fair value as even after considering the 50%investment company discount the Fair Value based on latest audited Balance Sheet andreviewed results of the listed entity whose shares are pledge as security is sufficient tocover the carrying value of loan the diminution in the market value being only temporarythe management is fully confident of the intrinsic value getting reflected on the stockexchange in the near future and will be able to recover the carrying value of loan.Management therefore has decided that presently no impairment loss allowance is requiredfor shortfall in value of pledge security.
b) We further draw attention to Note 34 to the financial statements wherein it isstated that due to the outbreak of COVID-19 pandemic across the globe and in India thereis a significant decline and volatility in the global and Indian financial & commoditymarkets and slowdown in the economic activities. The management of the Company have basedon current available information determined the carrying value of various financialassets after considering the potential macro-economic impact and all available internaland external information up to the date of approval of these financial results. The impactof the global health pandemic may be different from that estimated as at the date ofapproval of these financial statements and the Company will continue to closely monitorany material changes to future economic conditions.
Our report is not modified in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the Standalone Financial Statements section ofour report including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the Standalone Financial Statements. The results of our audit proceduresincluding the procedures performed to address the matters below provide the basis for ouraudit opinion on the accompanying Standalone Financial Statements.
|Key Audit Matters ||How our audit addressed the key audit matter |
|A. Impairment of Financial Asset due to Non Recoverability of Loan from the legal heir of one of the borrowers || |
|The Company is not being able to recover a loan from the legal heir of a borrower given against security of shares of a listed entity (Pledge Security) and the balance as on 31-03- 2020 is Rs.19.63 crores. Consequently the Company has invoked the said pledge Security. Major quantity of the said invoked pledge security has been freezed by a statutory authority on account of legal disputed matter of the company and hence company is unable to sell the same to recover the loan and interest thereon. Mangement is confident of freeze getting lifted on pledge security as the said pledge security is not part of the dispute. The Pledge security is infrequently traded on the stock exchanges. The quoted Market value of Pledge Security is Rs 7.65 crores as on 31-03-2020 and as on signing of financial accounts is approx Rs.9.70 Crore. based on latest audited Balance Sheet and reviewed results of the listed entity whose shares are pledge as security is sufficient to cover the carrying value of loan the diminution in the market value being only temporary the management is fully confident of the intrinsic value getting reflected on the stock exchange in the near future and will be able to recover the carrying value of loan. Management therefore has decided that presently no impairment loss allowance is required for shortfall in value of pledge security. ||1. We read and assessed the Company's accounting policies for impairment of financial assets and their compliance with Ind AS 109 |
| ||2. We evaluated the management's reasonableness for not making provision in the books of accounts for the shortfall in the value of security. |
| ||3. We have further assessed the financial statements of the company whose shares are pledged. |
|B. Amount advanced to Associate Company || |
|The Company has entered into sub lease agreement for Production of Indian made foreign Liquor brands owns by the company or for which company has been granted the authority for production and marketing with its associate company on 20th of March 2020. As per the agreement company has already advanced amount of Rs.11.50 Crore which will be adjusted over period of time against the bottling charges payable to the associate. ||1. Examined the agreement entered by the company with the associate company. |
| ||2. Discussion with the management for understanding the demand for the company's brand of Indian made foreign liquor and utilization of capacity of associate by company and other parties by way sub-lease |
| ||3. Analysed the past year capacity utilization and sales achieved by the company for the said brands |
| ||4. Studied the management projection towards the cash flow that would be generated from Bottling contracts of Associate from which advances will adjusted |
Responsibilities of Management for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these financial statements that givea true and fair view of the financial position financial performance changes in equityand cash flows of the Company in accordance with the accounting principles generallyaccepted in India including the Accounting Standards specified under Section 133 of TheAct read with Rule 7 of the Companies (Accounts) Rules 2014. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding the assets of the Company and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the company's financialreporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.
Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 issues by the CentralGovernment of India in terms of sub section (11) of the section 143 of the Companies Act2016 we give in the Annexure A a statement on the matters specified in paragraphs3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act based on our audit we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including the Statement of CashFlow dealt with by this Report are in agreement with the relevant books of account.
d) In our opinion the aforesaid financial statements comply with the Accountingstandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 except as described in the Basis for Qualified Opinion paragraph.
e) On the basis of the written representations received from the directors as on March31 2020 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2020 from being appointed as a director in terms of Section 164 (2) of theAct.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in Annexure B.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
I. The Company has disclosed the impact of pending litigations on its financialstatements. Refer Note 30 to financial statements.
II. According to the information given to us the company has not entered into anylong-term contracts including derivative contracts.
III. There has been no delay in transferring any amount to be transferred to InvestorEducation and Protection fund by the Company.
For A.R. Sodha & Co.
Chartered Accountants FRN 110324W
A.R. Sodha Partner M No.031878
Place : Mumbai
Date : 24th July 2020
UDIN : 20031878AAAABD4743
ANNEXURE A TO AUDITORS'S REPORT
On the basis of such checks as we considered appropriate and in terms of informationand explanations given to us we state that:
1. a. The Company has generally maintained proper records of fixed assets showing fullparticulars including quantitative details and situation of fixed assets.
b. According to information given to us fixed assets have been physically verified bythe management at reasonable intervals and no material discrepancy was noticed on suchverification.
c. According to the information and explanation given to us and on the basis of recordsfurnished before to us the title deeds/ownership documents of the immovable propertiesare held in the name of the company.
2. a. According to information and explanation given to us by the management andrecords furnished before us Inventory of Finished Good Raw Material Packing Materialand under construction property have been physically verified by the management atreasonable intervals. In our opinion and on the basis of our examination of the recordsthe Company is generally maintaining proper records of its inventories. No materialdiscrepancy was noticed on physical verification of inventory by the management.
3. According to the information and explanation given to us and on the basis of recordsfurnished before us company has granted unsecured loans to one party covered in theregister maintained under section 189 of the Companies Act 2013.
a. The terms and conditions of the grant of such loan are not prejudicial to theinterest of the company.
b. According to information and explanation given to us the loan is repayable on demandand has been repaid as and when demanded. Interest has been served on a regular basis.
c. Loan has been repaid as and when demanded and hence there is no overdue amount.
4. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has complied with the provisions ofsection 185 and 186 of the Companies Act 2013 with respect to the guarantees andsecurities given. However the company has not given any given any loan or made anyinvestment under section 185 and 186 of the Companies Act 2013.
5. According to the information and explanations given to us and on the basis of ourexamination of the books of account the Company has not accepted any deposits within themeaning of section 73 to 76 from public during the year. Accordingly clause 3(v) ofCompanies (Auditor's Report) Order 2016 is not applicable.
6. According to the information and explanation given to us the Company is not requiredto maintain cost records as specified under section 148 sub-section (1) of the CompaniesAct 2013. Accordingly clause 3(vi) of Companies (Auditor's Report) Order 2016 is notapplicable.
7. a. The company is generally regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income Tax Sales Tax Goods andService Tax Cess and any other statutory dues except delays in the payment of TaxDeducted at Source Goods and Service Tax. No undisputed statutory dues as stated above isoutstanding as at 31st March for more than six months from the date they become payable.
b. According to information and explanation given to us there are no disputedstatutory dues relating to Income Tax Sales Tax Custom Duty Excise Duty Cess Goodsand Service Tax or any other statute except as stated below:
|Name of statute ||Nature of dues ||Year(s) to which it pertains ||Amount Not Paid ||Forum where dispute is pending |
| || || ||(Rs. in Lacs) || |
|Income Tax Act1961 ||Income Tax Demand ||A.Y.2011-12 ||220.38 Lakhs ||Commissioner Of Income Tax (Appeals) |
|Income Tax Act1961 ||Income Tax Demand ||A.Y.2012-13 ||12.08 Lakhs ||Commissioner Of Income Tax (Appeals) |
|Income Tax Act1961 ||Income Tax Demand ||2016-17 ||321460 ||Rectification yet to be filed with the Assessing Officer. Refer Note 30 to the financial statements |
|Income Tax Act1961 ||Income Tax Demand ||2018-19 ||2085350 ||Scrutiny Assessment under process with the Assessing Officer |
8. According to the information and explanation given to us and records examined by usthe Company has not defaulted in repayment of dues to any financial institution or bank asat the Balance Sheet date.
9. According to information and explanation given to us and records examined by us thecompany has neither raised any money by way of public offers nor raised any term loanduring the year. Accordingly Clause 3(ix) of Companies (Auditor's Report) Order 2016 isnot applicable.
10. During the course of our examination of the books and records of the companycarried out in accordance with generally accepted auditing practices in India andaccording to the information and explanation given to us we have neither come across anyinstance of fraud on or by the company noticed or reported by its officers or employeesduring the year nor we have been informed of such instances by the management.
11. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided managerialremuneration in accordance with the requisite approvals mandated by the provisions of theSection 197 read with Schedule V of the Companies Act 2013.
12. In our opinion and according to the information and explanations given to us theCompany is not a Nidhi Company. According the clause 3(xii) of Companies (Auditor'sReport) Order 2016 is not applicable.
13. According to the information and explanation provided to us and based on ourexamination of the records of the Company the transaction with the related parties are incompliance with section 177 and 188 of Companies Act 2013 where applicable and thedetails of such transactions have been disclosed in financial statements as required bythe applicable Accounting Standards.
14. According to the information and explanation provide to us and based on ourexamination of the records of the company the company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year. Accordingly the clause 3(xiv) of the Companies (Auditor's Report) Order 2016 isnot applicable.
15. According to the information and explanation provided to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransaction with directors or persons connected with him. Accordingly clause 3(xv) of theCompanies (Auditor Report) Order 2016 is not applicable.
16. Considering the asset and income pattern the company is not require to holdcertificate of registration under 45-IA of the Reserve Bank of India Act 1934.
For A. R. SODHA & Co.
A. R. Sodha
Partner M. No 3187
Place : Mumbai
Date : 24th July 2020
UDIN : 20031878AAAABD4743
ANNEXURE B TO AUDITORS'S REPORT
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financial reporting of ComfortIntech Limited ("the Company") as of March 31 2020 in conjunction with ouraudit of the standalone Ind AS financial statements of the Company for the year ended onthat date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting.
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the ICAI.
For A.R. Sodha & Co.
Partner M No. 31878
Place : Mumbai
Date : 24th July 2020
UDIN : 20031878AAAABD4743